Even as expert opinion sours on China’s economy, Chinese themselves remain highly optimistic about the state of their economy.
A new poll by Pew’s Global Attitudes Project found that 88 percent of Chinese citizens say their national economy is doing good, more than in any of the other 38 countries Pew surveyed.
80 percent of Chinese also believe their national economy will improve in the next year, which was again the highest percentage in all the countries included in the poll. Only 2 percent said they believe their economy will grow worse in the next twelve months, far less than any other country.
China also topped the list in terms of the percentage of respondents saying their country is headed in the right direction, with 85 percent of Chinese expressing this sentiment.
Less optimistically, 53 percent of Chinese said the government should first address rising prices, a larger percentage than in any other country except Pakistan, where 66 percent said the same. Over one-quarter of Chinese said that the government’s top priority should be to address the widening inequality between rich and poor. This was higher than in any other country included in the poll.
The general optimism of the Chinese people contrasts sharply with the growing pessimistic of economists and other experts. As Reuters recently reported, “In the space of five months, analysts have swung from confidently predicting a modest pick-up in the world's second-biggest economy to pondering the chance that China will miss its own 7.5 percent growth target this year.”
Similarly, long-time China watcher Bill Bishop notes, “The prospects for China’s economy look so challenging for the remainder of 2013 that increasing numbers of usually cheerleading investment bank economists are cutting their rosy growth forecast for China.”
They aren’t alone. Earlier this week the International Monetary Fund reduced its own growth estimate for the Chinese economy this year by 0.25 percent, from 8.0 percent to 7.75 percent. In making its slightly reduced outlook, the IMF said the expansion of credit to local governments, environmental issues, and income inequality were particular concerns. That being said, the IMF said the Chinese economy remained relatively strong and noted that the new Chinese government was pursuing an aggressive reform agenda to address the major challenges the country faces.
The IMF isn’t the only to express concerns over debt. Last month Fitch’s downgrade yuan-denominated debt to single-A-plus from double-A-minus, the first such download since 1997, according to the Wall Street Journal. The credit rating agency said the downgrade was made because of concerns over its growing debt problem.
Fitch’s analyst Charlene Chu has been particularly outspoken about what she perceives as the danger of China’s debt.
“There is just no way to grow out of a debt problem when credit is already twice as large as GDP and growing nearly twice as fast,” Chu said, Bloomberg reported. Bloomberg also noted that “Chinese banks are adding assets at the rate of an entire U.S. banking system in five years.” JP Morgan Chase has issued similar warnings about the shadow banking industry’s growth.
Senior Chinese leaders have also acknowledged the country faces “huge challenges” that will have to be tackled in the context of lower growth.
Not everyone agrees that Chinese debt is as dire as some are claiming. Former senior partner at Goldman Sachs Asia, Fred Hu, told South China Morning Post this week that China does not face a short-term debt issue, explaining:
"For a growing economy, debt-GDP ratio is not a fixed one. It's dynamic. Italy or Spain, why are they in trouble? It's because their economy is shrinking and they have heavy debt. I think 60 to 65 per cent is a level that China can manage comfortably."
Zachary Keck is editorial assistant at The Diplomat.